TECH COAST ANGELS. Tech Coast Angels. New Angel Investment Strategies. Member Handbook

Transcription

1 New Angel Investment Strategies Tech Coast Angels Member Handbook

2 Who are Tech Coast Angels? Tech Coast Angels is an organization of individual angel investors, operating as four networks throughout Southern California. TCA members investing as individuals represent the region s leading source of early stage funding and guidance for early-stage ventures. Los Angeles Orange County San Diego Westlake Village/Santa Barbara Growth through Innovation Tech Coast Angels

3 Tech Coast Angels TCA members provide seed and early-stage capital in the range of $100K-$2M. Since 1997, TCA members have invested $68 million in more than 104 Southern California Companies, together with 10x from venture capital co-investors. TCA members are primarily former C-level executives; some members are former venture capitalists. TCA members mentor and coach entrepreneurs, serve as directors, provide industry contacts, and assist with team building, strategic planning and subsequent fundraising. Tech Coast Angels

4 Who are Angel Investors? Invest TECH own COAST capital ANGELS Mostly operating backgrounds CEO s, founders, senior exec s, VCs and professionals Active vs. Passive Extensive networks and resources Domain expertise Interested in your business Can devote time and add substantial value Limited financial resources (compared to institutions) Seeking Queen Isabella s Support Tech Coast Angels

5 When Do Angels Invest? I have nailed the fundamentals: we have third-party validation This venture is ready to grow very, very rapidly Rapid growth Liquidity Event VCs, customers I have an idea Transition Angels, customers Incubation Sweat equity, friends, family, fools, customers Tech Coast Angels

6 What Angels Bring to a Company Funding Direct Venture capital affiliates Guidance & Team Building Mentoring and coaching Active on Board of Directors Advisory Board participation Contacts Additional management Customers Vendors Strategic partners Technologies Service Providers Follow-on financing Tech Coast Angels

7 TCA Organizational Overview Founded in 1997 in OC The largest angel groups in US invest only in Southern Cal Creates or participates in approx. 30% of SoCal early stage companies 270 members organized in four networks LA, OC, SD, Westlake/Santa Barbara Invest as individuals Approximately 20 venture capital firms are official affiliates Organized process for collaboration Provide mentoring and guidance as well as capital Santa Barbara Westlake Los Angeles Orange County San Diego Tech Coast Angels

8 TCA & Network Organization Board TECH of COAST Governors ANGELS (BOG) oversees TCA networks; the BOG is comprised of the network presidents, a representative from each network, a Chair, Vice Chair, Immediate Past Chair and Founder. Networks are run by President and an executive committee; each network has a BOG representative Networks conduct regularly scheduled screening sessions for companies passing the pre screening process Each network organizes diligence teams for prospects in its region Networks hold monthly dinner programs featuring companies finishing diligence Tech Coast Angels

9 Membership Prospective members are encouraged to attend one dinner meeting and one screening session before they formally apply for membership Prospective members submit an application on the web-site at Member fees vary from $1,350 to $1,750 per year. New members pay a full fee upon joining and the next year, fees are pro-rated to convert to a calendar anniversary Annual member fees cover meals and facility costs for dinner meetings and screening sessions Each network recruits six website sponsors at $4,000 per year; networks also recruit event-specific sponsors Tech Coast Angels

10 TCA Web Site Members have a User ID and password for restricted access Regular web-site training sessions are available with Investment Screening Directors Jeff Cohn and Atticus Wagner Members post complete bios/photo to Members section Deal leads post due diligence materials to the web site Interested members may elect to receive notices as due diligence materials are posted File Cabinet provides investment guidelines and due diligence checklists TCA Newswire is published at least three times per year Tech Coast Angels

11 TCA Events Members TECH COAST are ANGELS expected to RSVP on the website for all events, including screening sessions VC Affiliates and Sponsors attend dinner meetings Members are encouraged to invite guests, including future potential presenters and prospective members to dinner meetings and screening sessions Member referrals are a reliable source for new members Dinner meetings guests pay $75 guest fee payable at the door Dinner sessions represent a vital step in the organization s investment process, attendance is highly encouraged to ensure active membership status Tech Coast Angels

12 Membership Policies & ROMAC TCA has formal Rules of Membership and Conduct, which must be executed before becoming a member Members are expected to invest a total of $50,000 per year, typically two investments at $25,000 Members are prohibited from receiving any consideration for bringing deals to or getting funded by TCA or its VC affiliates Members may not solicit other members for non-tca deals Members are not allowed to use the network or TCA address lists for personal announcements Members who are serve as mentors to a venture that is deemed not ready for TCA, are permitted to receive founder shares for services rendered subject to some restrictions Tech Coast Angels

13 Deal Screening Process Each network has a designated deal pre-screening team Ventures are invited to a formal screening session At each screening session, interested members indicate interest in further due diligence and business plan review Deal leads are identified and the processing team is organized Diligence is verification of the representations by the venture; markets, customers, agreements, references, backgrounds, etc.; results are posted to the website The investment process concludes shortly after the companies successfully present at multiple network dinner sessions Tech Coast Angels

14 TCA Criteria For Candidate Companies Located in Southern California (within driving range). Addressing a significant and compelling business need. Fast-growth segment and market size enabling 5x-10x return in 4-8 years. Validation from lead customers. Protectable technology or business model with which to leverage a return. Coachable and qualified management team. Ability to attract future venture funding Reasonable exit in 4-8 years Tech Coast Angels

15 Comprehensive Screening Process TCA Members VC Affiliates TCA Sponsors TCA Website INCOMING OPPORTUNITIES Pre-Screen ~ 30 per month General Referral Sources Network Screening Presentations 40% of Opportunities Due Diligence, Valuation & Terms 10% Network Dinner Presentations 7% Funding 4% Tech Coast Angels

16 Member Development Member education sessions are provided three times per year at the joint dinner meetings held in Long Beach Individual networks conduct occasional training sessions for new members Website is repository for diligence guidelines and checklists and templates Members develop by getting involved in diligence teams and contributing domain expertise where applicable to needs of new portfolio company Tech Coast Angels

17 Web Site File Cabinet Rules and Policies Minutes, Financials, Bylaws Mentoring Guidelines Presentations Deal Screening Guidelines Due Diligence checklists and Sample Term Sheets Letterhead Templates for Letters, Envelopes & Avery Labels (MS Word) Articles of Interest Tech Coast Angels

18 Some Angel & VC Differences Angels Look at cold call deals Willing to coach and mentor Work deals to make fundable Have extensive operating experience as former C-level execs Domain expertise and diverse investment appetite Typically invest no more than $1M, often $500K Often serve on boards VCs Only look at referrals from trusted sources Companies should already be funded, limited time to coach or mentor Mix between financiers, MBAs, and operating execs Few partners, narrower focus on specific areas Typical minimum is $2M and will go to $10s of millions Often serve on board seats Tech Coast Angels

19 TCA Portfolio Companies Prepaid credit card model Sequoia Capital invested in 2004 and in 2005 Outsourced logistics software platform Clarity invested $20M in Language translation software Palisades Ventures invested in Luxim New technology lamp for DLP TVs WorldView and Sequoia Capital have invested. Tech Coast Angels

20 Example of TCA investment Green Dot Corporation America s leading provider of prepaid cards ANGEL ROUND Series A (Jan 2001): $1.965M o TCA: $655K of the round o Valuation: $3.5M MILESTONES 47,000 retailers in all 50 states NOTE fka Next Estate AWARDS REVENUE 2005: $50M o $1B gross transactions VENTURE CAPITAL Series B (Feb 2003): $2.2M o o TCA: $530K of the round Valuation: $12.5M Series C (Feb 2003): $8.4M o TCA: $243K of the round o Valuation: $20M Series C-1 (Mar 2004): $6M o Valuation: $50M VC firms investing

21 Example of TCA investment Luxim Corporation Patented Filament-Free Lamp Technology ANGEL ROUNDS Seed (Feb & Apr 2003) o TCA: $50K & $100K o Other: $25K & $100K o Valuation: $1.5M & $1.8M CUSTOMERS Who s who of video industry PRODUCTS Key component, major market o Microwave Energized Plasma Lamp BOOKINGS First production order of $1+ VENTURE CAPITAL Series A (Aug 2003): $900K o Valuation: $2.7M Series B (Aug 2004): $5.75M o TCA: $552K of round o Valuation: $6M Series C (Aug 2005): $15M o TCA: $1.5M of round o Valuation: $43M Venture firms investing

22 Example TCA investment CaseStack Inc. Logistics Outsourcing Provider For Packaged Goods ANGEL ROUND Series A (Dec 2002) o TCA: $450K o Valuation: $3.5M MILESTONES # 4 fastest growing in US o 39,071% since 2000 National acquisitions pending REVENUE 2005: $36M o Run rate: $45M year-end 2005 VENTURE CAPITAL Series B (Jul 2003): $3.7M o Valuation: $12M Series C (Jun 2005): $20M o Valuation: $28.5M VC firms investing AWARDS

23 Example TCA investment DriveCam Inc. Taking risk out of driving Fleet Driving Behavior Management Systems ANGEL ROUND Seed (Jan 2000) o TCA: $400K o Other: $600K o Valuation: $4M MILESTONES Industry leader o Little or no competition 30,000 units installed REVENUE 2005: $16M 2006 est.: $30M VENTURE CAPITAL Series A (Jun 2005): $2.4M o TCA: $180K (of round) o Valuation: $7M Series B (Jun 2005): $18M o Valuation: $29M Venture firms investing AWARDS

24 Example TCA investment WiSpry Inc. Think Big. Dream Small. Pioneer in Tunable RF/MEMS Silicon Solutions ANGEL ROUND Series A (Jan 2004) o TCA: $763K o Other: $100K o Valuation: $1.5M MEMS performance, IC fab MAJOR ACOUNT Samsung VENTURE CAPITAL Series B (Feb 2005): $6.5M o Valuation: $5M Venture firms investing PRODUCTS: integrated filters

25 Investment Summary Dollars in Millions Year COs Rnds New$ F-On TOTAL New$ F-On TOTAL Ratio TOTAL TOTAL Tech Coast Angels

26 TCA Contact Information Member, staff, VC affiliate and sponsor information is on the website Within the Member Directory, you can click on individual networks, new members, applicants and the BOG. A Search function provides more advanced searches Staff contacts: LA Investment Screening Director: Jeff Cohn, jeff@techcoastangels.com, OC Investment Screening Director: Atticus Wagner, oc@techcoastangels.com, SD Admin Director: Nepi Ilgaz, nilgaz@connect.org, Financial Director: Bonnie Welt, bonwelt@flash.net, Tech Coast Angels

27 How to be a better member Attend events and get involved Join a committee Help screen incoming deals and with due diligence Visit other Screening Sessions Lead a deal and help close a deal Connect Volunteer to speak at events and conferences Network with members and referral sources Join LAVA, Software Council. OCTANe, OCVG, OC Innovation Week, TCVN Invest in TCA deals Diversify Invest in a biotech or medical devices company Share your experiences Describe investing strategy Successes and failures What are you reading? Build camaraderie Take a member out for coffee Read, listen and learn World is Flat, Friedman Freakonomics, Levitt Wisdom of Crowds, Surowiecki The Tipping Point, Gladwell Tech Coast Angels